New Tax Plan -- Fair or Not Fair

     If I had to bet, I would bet that the proposed Republican tax reform bill does not get passed, that it never actually makes it into law. However, I also know I am not very good at predicting the political future, so let me put in my two cents' worth about the tax reform proposal ... what it proposes, and whether it's fair or not. My information about the proposal comes from U.S. News, which I assume is accurate but not necessarily comprehensive.

     First of all I agree that the tax code ought to be simplified. Does this proposal accomplish that? Well, it reduces the tax brackets from seven to four; it raises the standard deduction so more people will be able to file without having to itemize deductions. Perhaps it's a small step in the right direction. But it FALLS SHORT in accomplishing a true simplification that would allow the majority of people to understand the code and do their own taxes.

     The most-advertised change is the lowering of the business tax from 35% to 20%. People will argue all day long about whether or not this is a good thing. Proponents say it will spur investment, jobs and income. Opponents argue that it will add to the federal deficit and that most of the benefits will go to the rich. The truth is, NOBODY KNOWS what the effects will be. So it's hard to say whether this is fair or not.

     The current seven tax brackets will be reduced to four, ranging from 12% to 39.6%. The highest rate has not been reduced. So ... FAIR.

     Certain deductions are capped. The mortgage deduction is currently capped at $1 million. In other words, mortgage interest is tax deductible up to the interest paid on a $1 million loan. The proposal calls for lowering the cap to $500,000. Despite howls of protest from the real-estate industry, this only seems FAIR to me. I think it's a good idea for the federal government to encourage home ownership, because it is generally considered a social good. But come on. There should be a reasonable limit on how much the rest of us subsidize people buying million-dollar-plus McMansions, don't you think?.

     The other cap is for state and local property tax. Currently, all real-estate tax is exempt from federal income tax. The proposal calls for a cap at $10,000. In effect, this increases taxes on people living in wealthy areas, who benefit from the extra services their $10,000-plus property taxes pay for. Again, I think we should subsidize local governments, particularly local school systems. But there's no reason why regular people should subsidize other people's $10,000-plus luxuries. So ... FAIR.

     The Republican tax plan would eliminate the tax credit for buying electric vehicles. FAIR, BUT NOT SMART. It would eliminate deductions for state and local income taxes, casualty losses, medical expenses (currently deductible at over 10% of income); alimony payments and moving expenses necessary for a job. To compensate the Republican bill would almost double the standard deduction from $12,700 to $24,000 for a married couple and from $6,350 to $12,000 for single filers. It would also increase the child deduction from $1000 to $1600, but eliminate the personal exemption. On balance this would benefit families and punish single people, but the effects would be minimal. So all this pretty much comes out in the wash, and simplifies the tax code. FAIR.

     The plan would also eliminate the alternative minimum tax -- originally designed to make sure the very highest-income individuals pay at least some tax, even if they pile on the deductions and other tax dodges available to those with high incomes and high-priced accountants. But the AMT has morphed into a complicated add-on that now affects not just the super-rich, but also significant numbers of upper-middle-income filers. FAIR.

     The plan would not eliminate the so-called carried interest clause, which offers select financial executives a huge tax break by classifying their income as capital gains instead of regular income, thus taxing it at a lower rate. Donald Trump railed against this tax break during the campaign -- as did Hillary Clinton and Bernie Sanders and virtually every other candidate. But despite the protests, this particular tax break for the favored few has not been eliminated. NOT FAIR.

     The plan would also phase out the inheritance tax (or the death tax, in Republican parlance). Currently, estates worth over $5.5 million are subject to estate tax. Under this plan no estate tax would be levied on even the wealthiest of the wealthy. NOT FAIR.

     One last thing. There was talk of putting more severe caps on the amounts people could put into their 401K accounts. This element was dropped. So workers will still be able to deposit up to $18,000 in a 401K account. Yet people who do not work for a big corporation, who do not have a 401K, and instead rely on an IRA, are limited to a $5,500 contribution (or $6,500 if you're over 50). In my opinion, everyone should have the same caps on their contributions. Everyone should be treated equally. So ... UNFAIR.

     As I said, I do not know if this is a comprehensive look at the new tax plan, but it covers the basics. Some good things; some bad things. But is it progress? The beat goes on.

Packing in a Lot of Food

     With all the Halloween talk about treats and candy, B and I last Sunday thought we could pitch in for a more serious effort to help feed the children. It's an initiative through B's church, which gathered together 424 volunteers at our local university to help pack food that will be sent to poor children in some 80 countries around the world.

     The sponsor of the event was an organization called Feed My Starving Children, which is a Christian non-profit that has been distributing food to poor people since 1987.

Hard at work

     So we gathered in an auditorium, listened to a hymn, heard a prayer, then got the instructions on what to do. B and I headed off to a table where we were packing meals called Manna Packs. Each individually packaged meal basically consists of rice, fortified with soy, dried vegetables and powdered vitamins.

     Each table involved a 15-man operation. Four people ladled in the ingredients; two people funneled them into  plastic bags, two more checked and weighed the ingredients, two more folded the bags, and then one person heat-sealed the bags. Then a crew of four people packed the bags into boxes.

     Other volunteers were bringing in the ingredients and the empty boxes to the tables. Then the filled boxes were picked up by more volunteers and hauled off to a loading dock, where still others were loading the boxes into trucks. Meanwhile, there were a few Feed My Starving Children staff members who set up the production line, coordinated our efforts, and provided instructions, advice and general support.

Not me ... but a proud volunteer

     We were just one three-hour "shift" in a four-day operation that was packing and sending some 1.2 million meals around the world. A few members of B's church had been to Haiti to view one of the receiving ends of the operation -- where the food actually made it into the hands of poor, starving children. It was heartening to see the effects. They had "before" pictures of obviously malnourished children, and "after" pictures of the same children, only a few months later, who had been given a steady diet of these fortified meals.

     Our group packed over 100,000 meals, which sounds like a lot. But actually, it's a drop in the bucket. This would provide a two-week supply. But there was more to come, since another group was following in after us for another shift of packing food.

     Honestly, I don't know where they get the food, or how they process it into the ingredients that we poured into the Manna Packs. But I can tell you, I came away with a better appreciation of the difficult and enormous logistical job it is to meet even some of the needs of crying and starving children around the world.

      And also, after spending most of a morning on a production line, sealing plastic bags, and then ladling soy granules into a funnel, it gives me a better appreciation of the difficulty of working on an assembly line. My wrist was killing me by the end of the day, and B had a sore back. But if it saved even a few lives, it was worth the effort.

Summer Leaves, Autumn Nights

     I don't know what's it's been like where you live. But where I now reside, in southeastern Pennsylvania, outside of Philadelphia, the weather is still warm -- 74 degrees today -- and because of the unusually warm September and October, the leaves have yet to turn in any significant way.

     My windows are open. The air is humid. And darned if I didn't get a little sunburn when we were lying out in the backyard yesterday afternoon.

     Still, the season is upon us. And no matter the weather, the ghosts and goblins and skeletons come out to play.

    What I didn't know, before we moved here, is that Halloween is taken quite seriously around these parts. We used to live in the Hudson valley of New York, where Washington Irving's headless horseman haunts the byways and highways.
  

    
     But something is spooking the Delaware valley as well, though I don't know what it is. Even a harmless lawn chair makes you wonder: Who was sitting there, where have they gone, what happened to them?

   
     To bolster our defenses against the encroaching darkness, B sent me out to buy a treasure chest full of candy. If our clean living is not clean enough, if our good deeds are not good enough, then we are prepared to bribe any and all specters and phantoms to entice them to go haunt other victims.

   
     I happen to know, from previous experience, that Skittles are a favorite of any beguiling young enchantress who might happen by the house one evening.

    And we now have sugar-coated ammunition to fend off the pirates who might wash up on our shores in the dark of night.

     So beware, don't let the benign summer weather, the pleasant breezes that linger into fall, lull you into thinking that all is right with the world. Be afraid of the darkness, my friends. Do not venture down that empty lane, for you know not what evil lurks on the other end.

5 Questions to Ask Yourself After You Retire

Retirement is a destination, for sure, one that we have been working toward for decades. But retirement is also a journey. It begins when we leave work, and can easily last for 20 or 30 years. As with any journey, it sometimes makes sense to stop and review where we’ve been and where we’re going.

Here are five questions I can think of that are important to ask ourselves, when we first retire, then again on a regular basis throughout the rest of our lives. Maybe you have other questions that you think are important. But the point is, just because we're retired doesn't mean that life is over. It means we're living for ourselves rather than someone else, and we should examine our situation every once in a while . . . so we stay true to ourselves.

1. Am I on track? You probably had a vision -- or at least some dreams – of what retirement would look like long before you accepted your Apple watch. You might even have had some concrete plans – and maybe even a budget by the time you actually left work. Now we should ask ourselves:: How am I doing?

Think about your lifestyle. Are you retired to Arizona, like you planned? Or are you still living in your family home, cutting the grass, shoveling snow, and storing old textbooks for your kids? If you haven’t launched your retirement life, what’s stopping you? Is it an emotional issue, or a financial problem? If you haven’t made a plan, or have deferred a lot of decisions, now is the time to take control and get on with your life. 

2. What has changed? Retirement involves a transition from working and saving to relaxing and spending, from answering to others to answering to ourselves. But the way we begin our retirement may not involve the same lifestyle that we settle into a few years down the line.

In my own case, the early retirement years looked similar to my working years, since my partner hadn't yet retired and we were living in the same house, with the same friends. Now we've relocated to Pennsylvania. We're finding new activities, new friends, and trying to figure out how to spend the winter in a warmer clime. Eventually we'll settle down – and we can then re-evaluate our expectations after we’ve tried out our new lifestyle for a while and have a better sense of what the future holds.

3. What do we want to change? We might get a few surprises when we compare the vision we had for retirement with the reality of our current life. So is there anything about your new lifestyle that hasn’t measured up to expectations? Maybe you’ve checked off a few items on your bucket list, and now you’re ready for more. Or maybe some of your original items no longer seem interesting.

Change doesn’t stop just because we’re retired. Some people relocate to Florida only to find they can’t stand the heat, and they move back home – or halfway back to the Carolinas. However far you’ve come in your retirement voyage, stop and consider if you still want to continue in the same direction, or if it’s time for a course correction. 

Don't let the retirement train leave without you

4. Are any surprises in store? When you set your retirement budget, you presumably projected the everyday expenses that will likely not vary much from month to month or even year to year. Then you took into account some discretionary items – a new car or a trip to Hawaii -- and developed a plan to balance your financial resources with your spending expectations.

But sometimes we get a surprise. If you’ve received an inheritance, you might make more ambitious plans. If you faced an unexpected medical bill  or major home project, you might have to make some cuts in your discretionary expenses. The recent surprise in my life? My daughter got married. Yeah, I know, I should have figured she would get married eventually. But who knew they would be sending me the bills . . . and that it would cost so much?!? Anyway, if you haven’t yet been hit with one of life’s surprises, look ahead to see if any unexpected events could be on the horizon.

5. We should have a plan … and be willing to change. It’s prudent to plan ahead. But it’s also important to remain flexible, especially from a financial point of view. We make a plan based on everything we know, plus some reasonable projections. But every once in a while we have to stick our heads out the window to see if the weather is changing – and make adjustments as needed. If you’re overspending, for example, you might consider cutting back on discretionary items or taking a part-time job to fill the gap.

          More importantly, if you realize that you're not doing what you want to do in retirement, that your retirement has gone off the rails, there's no reason in the world why you can't get back on track Sometimes retirement doesn’t play out exactly the way we envisioned when we were younger. There may be periods of uncertainty. But if we’re flexible, and periodically review our situation, then we will most likely find a clear road ahead.

New Ideas for Old Problems

     I have been AWOL from blogging for the last couple of weeks. My time has been consumed first by a short-term job that I agreed to do, and then by my daughter's wedding which took place in Brooklyn, NY, last weekend.

     I realize that the typical blogger would post lots of wedding photos when their daughter got married. But I must confess, I am a rather private person. Now that may seem odd coming from someone who's been blathering on about this and that for the last -- gosh, it's been seven years now! But, actually, for the most part I try to keep my family out of it. After all, they have nothing to do with retirement, and they are vaguely embarrassed by their dad and all his Baby Boomer friends.

     (My daughter, walking around hipster Brooklyn, getting ready for her hipster wedding ceremony, finally admitted to me: "Well, Dad, I guess I am a Millennial after all." But she still won't admit that she's a hipster.)

Street scene from the 2nd best place to retire

     Anyhooo . . . this week it's time for me to file a report from the group of bloggers called the BBB, or the Best of Boomer Bloggers. And if we're not the best, we are at least a representative sample. So here goes:

     Kathy Gottberg produces a blog called Smart Living 365. So it should be no surprise to find out that she's smarter than I am. She's been on vacation, but instead of ignoring her blog as I have, she signed up guest blogger Lynne Spreen of Any Shiny Thing. Spreen has posted an article Your Big Empty-Next House Could Be the Solution to 3 Problems which connects grandparents to a new trend in housing -- and offers an idea for retirees who might want to find more use for their too-big empty nest.

First buss at a hipster bar in Brooklyn

     Meryl Baer of  Six Decades and Counting has also been on vacation. She spent time in her old hometown, where she lived for 30 years while working and raising a family. Then she moved away, only to discover that in her absence the area has become a top retirement destination. Read about her short visit -- and what city is ranked by U. S. News as the 2nd best place to retire -- in Stopover at the Old Hometown.

     Meantime, if Meryl Baer has a knack for leaving town at just the wrong time, apparently Laura Lee Carter became an author at just the wrong time . . . and perhaps many of us will feel her pain. According to Carter in Amazon Says: Save Money, Don't Pay Authors, Amazon has betrayed authors by allowing third-party sellers to deceive customers into buying "new" books that do not come from the publishers, thus cutting authors off from their royalties. But, as Carter admits, all is not lost, for we do not really write for money or fame; we write to learn about ourselves and to make connections with others.

Rita is safe from the sun

     On Heart, Mind, Soul Carol Cassara reports on how a group of women found a more positive way to use Amazon. As we all know, technology and social media can be full of discord and disharmony, but Cassara knows that it can also bring out the best in people. Check out her post Generosity Revolution to see why it's important to look beyond our own limited experiences and reach out to other people in need.

     On the Survive and Thrive Boomer Guide, Rita R. Robison has discovered another benefit to our new technology. She points out that even with something as simple as an oil change, a Smartphone Can Be a Great Help, allowing consumers to compare prices and get the best deal. Then she finds out she needs to Wear Sunglasses and a Wide-brimmed Hat -- and we should too, not just in the summer but all year long, to protect our eyes as well as our skin.

    And finally, a new member of our group, Rebecca Forstadt-Olkowski of Baby Boomster, this week offers an overview of a conference called The New Old Age, hosted by The Atlantic magazine. The conference gathered together a distinguished group of experts who explored the way age is marketed in the media and offered a variety of ways we can change our vocabulary to bring a more positive perception of aging.

    So hats off to Rebecca for a fine wrap-up . . . er, figuratively speaking, since we're all keeping our wide-brimmed hats firmly in place. Have a good week!